Comments (16)

• R.P. McCosker

  Mark Skousen, of course, was the then-head of the libertarian organization FEE who was removed from his job for having arranged to have Rudy Giuliani, who must surely qualify as an antichrist where libertarianism is concerned, as the featured speaker at a FEE event.

  Perhaps we can say, charitably, that Skousen is *confused* when it comes to what constitutes libertarianism.

  But enough of the ad hominem.

  Let's look at what the reviewer says here:

  "Just so that we are clear here — readers, please forgive the tedium — praxeology does not mean that the economist does no historical research. It means that theory itself is not generated and proven by means of historical studies. Theory is employed to understand history, and history to illuminate theory. (See Mises's Theory and History.) Doing history without theory answers no questions about causation, and ends in intellectual chaos. And although Skousen himself admits that empirical evidence can go awry, he proclaims at the end of the chapter that Chicago is the winner of the methodological dispute."

  I think I understand the argument that the realm of human history and activity is too complex to justify drawing many broad or abstruse conclusions on the basis of empirical evidence. What I'm less sure of is how anybody can be confident in the application of aprioristic premises in interpreting human history and activity. It looks too easy to be drawn into what some conservative thinkers call "ideology", where the facts are made to fit the theory.

  How do we keep ourselves "grounded" so as not to be merely making the facts "fit the theory"? What distinguishes the kind of "rationalism" that a thinker like Oakeshott warns against from reliably applicable aprioristic thinking?

  Published: November 2, 2005 1:33 PM

• Marco

  "praxeology does not mean that the economist does no historical research. It means that theory itself is not generated and proven by means of historical studies."

  I disagree with this, although I understand it is the Austrian position. For example, in a footnote to the introduction of "Democracy, The God that Failed", Hoppe writes

  "Mathematicians and logicians, too, claim to be concerned with necessary relations, and yet they do not claim to be infallible. Rather, what is claimed in this regard is only that in order to refute a theoretical proposition (in contrast to a hypothetical one) another, even more fundamental theoretical argument is required, just as another mathematical or logical proof or argument is required (and not "empirical evidence") in order to refute a mathematical or logical theorem."

  This is false. Mathematics is a quintessentially a priori discipline, but this doesn't mean experimental methods are out of the question. If a mathematical theorem is wrong, this can be shown either by finding a fault in its proof and demostraring a contradicting theorem or by finding a counterexample. The history of mathematics is full of conjectures which were occasionally regarded as theorems because someone thought he had rigorously proved them, and were shattered when someone (sometimes the same person) found a counterexample. See for instance

  http://mathworld.wolfram.com/WhiteheadLink.html

  Published: November 2, 2005 2:52 PM

• Ben Parkinson

  The only economics book (historical or otherwise) that I have ever owned is "Economics in One Lesson" by Henry Hazlitt.

  In general, I disagree with the Chicago school on matters such as monetary policy and school choice. Fed chiefs and even computers cannot reasonably manipulate interest rates and fiat money supply while billions of transactions (outside the Fed's control) are being made. School choice will make private school even more expensive while making private schools subservient to Title IX. among other regulations.

  However, I tend to agree with the Coase Theorem because it provides a better alternative to the Libertarian idea of just letting everyone sue for pollution, thereby creating a jackpot mentality and making products and services more expensive.

  Just my two cents worth nothing after inflation.

  Published: November 2, 2005 3:05 PM

• Valerio Filoso

  Pongracic does quite a good job in reviewing Skousen's latest book, but basically his is a piece of ideology, the neverending mantra of the austrian vulgata. Well, I admit that Skousen's book could be too much easy going in some passages (however, this could be one of its strengths), but really makes you think harder if there's any perspective for a self-excluding libertarian movement. Just for the record, it was even Walter Block, in a bright article posted this summer on the same list, to call for a smarter confrontation between austrians and competing schools. For a radical libertarian, it would be just suicidal to escape competition withdrawing from the academic stage.
  Last, it's a matter of politeness not to focus on typos when reviewing a book, and not only because Pongracic himself - in his short article - mistakenly typed "Fischer" when wrote about the famous american economist Irving Fisher!

  Published: November 2, 2005 4:02 PM

• Ben Parkinson

  I was wondering the purpose of devoting two paragraphs to editorial mistakes in the book myself. Isn't that considered nitpicky?

  Published: November 2, 2005 5:59 PM

• Roger Mitchell

  Perhaps the author should consider his own spelling and grammatical errors in the above review. This is a case of the pot calling the kettle black. This is inexcusable, since computers point out every mistake in red or green. Furthermore, professors who write ought to hold themselves to a higher standard.

  Published: November 3, 2005 3:36 AM

• Brian Gladish

  R.P. and Marco,

  This epistemology thing is a tough one. I have been wrestling with it myself, one day agreeing with a priori and the next not.

  It appears to come down to the fact that we, as human beings, have insight into our own behavior and might be able to determine, and universally agree, that certain economic truths or laws exist. It is clear that these economic laws are based at some level on observation (note that marginal utility and subjective value were not the first answers to economic questions - people had to think, observe and attempt to answer questions about what they saw).

  Having determined these laws accurately (this seems to rest on general agreement), one may reason from them logically without fear of contradiction. That is why no Austrian will ever accept the results of a study which indicates that an increase in the minimum wage does not increase unemployment or that a hurricane improves the economy.

  Published: November 3, 2005 10:18 AM

• Eric Dennis

  Amazon quotes Roger Garrison on Skousen's book:

  "In his upbeat tale of two schools, Skousen gives us a delightful blend of theory, history, and political science, and shows that there is much common ground and scope for development."

  Maybe we could get some elaboration...

  Published: November 3, 2005 12:39 PM

• Ron Brown

  Going a little further with what Brian said.

  Other factors remaining unchanged, no one demands more of anything because the price has been increased. Our minds are structured this way and it can't be avoided. Simple self-reflection tells you this about yourself and observation confirms this about all other people.

  Hence, you may hire or retain a minimum wage employee after the government has raised the rate but you do it in spite of the higher cost, not because of it.

  Another example is the current housing bubble. No one buys a house for the sole reason that the price has gone up. They may buy it in hopes of avoiding even higher prices in the future or in the belief they'll make money by selling it for more later. In neither case, however, did they buy the house simply because the price was higher and they wanted to pay more rather than less.

  These truths are no less certain for non-monetary situations either.

  Published: November 3, 2005 8:00 PM

• Peter Bach

  I just wrote Dr. Pongracic an email imploring him to write a college-level economics principles text that includes an Austrian perspective. I concluded the email by observing that nobody else appears to have the guts to write such a sorely-needed text.

  Published: November 4, 2005 12:21 PM

• Marco de Innocentis

  Brian:

  The problem is that, as you point out, the laws of economics cannot be determined by logic alone, but also by means of introspection (insight) into the way our minds work. This is what Mises referred to as 'understanding' in Human Action. However, my understanding may be different from that of somebody else, and if economic laws are to have any application to real life problems, it should be possible to test them to some extent by looking at economic data.
  If, for instance, Mises predicts that government demonetization of gold would be followed by a fall in the price of gold (as he did in The Theory of Money and Credit), then when Nixon drops gold convertibility the price of gold soars, the obvious conclusion is that on this occasion Mises' 'understanding' failed him (he probably just overestimated the influence of governments on the price of gold).
  If Austrians refuse to discuss such objections they only contribute to their own marginalization from mainstream economics. On this I agree with Valerio Filoso.

  Published: November 7, 2005 5:44 AM

• Paul Edwards

  Marco:

  The prediction that a demonetization of gold would be followed by a fall in the price, or purchasing power of gold comes directly from the fact inherent in the demonetization; there is necessarily a lessening in the demand for gold because it plainly and simply represents one less use for gold. It is no longer used as money.

  This is not what happened in 1971. At the point before Nixon closed the gold window, the market value of gold was not $35 per ounce, but was in fact much higher. This is why Nixon had to close the window. Washington was loosing its ability to persuade foreign governments to not cash in inflated US paper money for gold. The value of gold was so much higher, in terms of USD, than the artificial pretense of a price given by the US government, that it was becoming irresistible for foreign governments, the only entities permitted to buy gold from the US at that price, to hold off cashing in on this below bargain basement price.

  Mises did not misunderstand this by any stretch and there is no hesitancy on the part of Austrians to discuss these issues; I think we rather enjoy dispelling economic myths. If the Austrians are marginalized it is because we are unwilling to put aside correct and honest analysis to conform to the desires of the greedy and corrupt establishment.

  Published: November 7, 2005 11:30 AM

• Don Lloyd

  Paul,

  The prediction that a demonetization of gold would be followed by a fall in the price, or purchasing power of gold comes directly from the fact inherent in the demonetization; there is necessarily a lessening in the demand for gold because it plainly and simply represents one less use for gold. It is no longer used as money.

  When gold loses its status as money, that in no way necessarily implies anything about the subsequent demand for its future exchange value.

  Regards, Don
  

  Published: November 7, 2005 12:26 PM

• Paul Edwards

  Hi Don:

  I don’t understand why you say that. Let me ask you this, if gold lost its status as useful for making desirable jewelry, and electrical connectors, would you concede subsequent demand for its future exchange value would diminish?

  Use as money was one of several sources of demand for gold, when it was money. When it is not money, that is one less use for it, and therefore a lessened demand for it ensues. How is that flawed?

  The regression theorem shows that when a commodity makes the transition from plain commodity to a monetary commodity, its value will increase because a new use for the commodity has arisen (money). Naturally, the reverse logic would tend to apply, if a monetary commodity is no longer such, there is less use for it, and so less demand for it.

  Practically speaking, can you imagine the increase in the demand for gold that would ensue, if most households began keeping a few ounces of it on hand because it was our currency, where presently they do not?

  Published: November 7, 2005 12:49 PM

• Don Lloyd

  Paul,

  Use as money was one of several sources of demand for gold, when it was money. When it is not money, that is one less use for it, and therefore a lessened demand for it ensues. How is that flawed?

  When gold was money, prices were relatively stable and holding more gold than required to meet near and intermediate term purchasing requirements could only be justified by the increased future productivity in the production of goods.

  When gold is replaced by paper money subject to government supply inflation, then holding gold for long term investment/speculation can easily be justified. Gold will tend to replace some other investment/speculation vehicles because of better risk/reward characteristics. This increase in demand may quite easily outweigh the reduction in demand for gold as actual money.

  Regards, Don

  
  

  Published: November 7, 2005 2:03 PM

• Paul Edwards

  Now i'm following you. I agree with you that the effect of one thing "may quite easily outweigh" the effect of another. However, this does not refute the effects of the one thing we are considering, all other things held constant. That is, the demonetizing of gold does not necessitate that people will begin to hold more gold for investment purposes. They might or they might not. However it is necessarily true that demonetizing gold will reduce the amount of gold held for monetary purposes, because it cannot be used for monetary purposes.

  Published: November 7, 2005 2:38 PM